However, the report written by its economists Saurav Anand and Anubhuti Sahay, said the investment cycle is likely to improve gradually in next fiscal year as the spike in Q3 was primarily driven by the telecom sector.
"Incremental investments, which track projects under implementation across all sectors, improved in Q3 due to a one-off increase in private sector investment," they said citing CMIE data.
But this was mostly because of just one investment into the telecom space worth around Rs 1 trillion by Reliance Jio. The report did not name Jio, though.
But the report said the spurt in Q3 is not sustainable. "We expect investment to slow in Q4, as private sector investment on the same scale is unlikely and the government is likely to trim capex to meet its FY16 fiscal deficit target. Stalled projects increased for the second consecutive quarter, albeit at a gradual pace," they said.
Also Read
There are still Rs 10.8 trillion worth of projects stalled, posing a major headwind to investment revival.
Stalled projects rose again in Q3 after declining since end-2012. With an additional Rs 20,000 crore worth of projects stalled in Q3 (as against Rs 1.1 trillion in Q2), the total stock of stalled projects rose to an all-time high of Rs 10.8 trillion.
Private sector investment is likely to improve mildly
in H2 of FY17, even though signs from investment data are not encouraging.
The report attributed the increase in investments in the December quarter to the uptrend in incremental projects under implementation. In Q2, there was a temporary dip.
The government has been the main driver of the investment recovery since mid-2014, with a focus on roads, railways and energy. Stalled projects rose for a second successive quarter, but at a slower pace.
Similarly, new investment announcements also slowed in Q3, pulling down the four-quarter moving average to Rs 2 trillion from Rs 2.8 trillion in Q2.
The slowdown was led by the private sector, which announced a lower value of projects in Q3. The government sector also announced fewer projects during the quarter. A continuation of this trend would point to a slowdown in project under implementation given the positive correlation between implementation and new project announcements.